The stock systems

Thursday, 21 March 2024 18:16

Differences between perpetual and periodic systems
Perpetual Periodic
General -continuously updated -periodically updated
-cost of sold inventory and -cost of sold inventory and available inventory to
available inventory to sell sell only calculated at the end of accounting period
available always
Costs Expensive Inexpensive
Implementation Difficult Easy
-sophisticated computer system -no sophisticated computer system needed
needed
Stocktake -At the end -At the end
-counted to contrast with trading -counted to check how much inventory was sold
stock account balance to ensure
its correct
Recording -Trading Stock account very -Trading stock account not active (end of year usage
active only)
-Cost of sales account very active -Cost of sales only found at the end of the
accounting period
-Purchases account very active (Shows cost of
bought inventory)
Accounts -Consists of the following -Consists of the following accounts; Sales, Debtor's
accounts; Sales, Debtor's allowances, Purchases, Carriage on purchases,
allowances, Cost of sales & Custom duties, Creditors allowances & Trading
Trading stock stock

Calculating in the periodic system:

1. Gross profit=Net sales-Cost of sales
- Closed off to Trading account
2. Net sales=Sales-Debtor's allowances
- Closed off to Sales account
3. Purchases: closed off to Trading account
4. Carriage on purchases: closed off to Trading account
5. Custom duties: closed off to Trading account
6. Net purchases=Purchases-Creditor's allowances
- Closed off to Purchases account
7. Opening stock and closing stock are closed off to Trading account
8. Balance goes to Profit and loss account (Gross profit)

Calculating the cost of sales:

→ Opening stock
→ +Net purchases
→ +Carriage on purchases
→ +Customs duties
→ =Inventory available
→ -Closing stock
→ =Cost of sales

Other information
Bank exists
Purchases
- Acts as a Trading stock account
- Doesn’t record credit purchase returns since there is a creditors allowance account

Inventory Page 1
Stock valuation
Thursday, 21 March 2024 19:21

1. FIFO
- First in first out (for expiring items, gadgets and trendy devices)
2. WAC
- Weighted Average Cost
-
- Cost of inventory sold (Cost of sales)=Number of total units sold*Weighted average cost per unit
- Cost of inventory available=Number of total units available*Weighted average cost per unit

Inventory Page 2